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How will ending the income tax help the poor?

in Ask Dr. Ruwart, Economic Liberty, Liberator Online, Taxes by Mary Ruwart Comments are off

How will ending the income tax help the poor?

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Question:

I was unable to persuade a liberal friend that the income tax is evil because it is essentially forced labor through coercion, or that we could largely pay for the elimination of the income tax simply by halting our overseas empire (it seemed best to use a liberal priority in this instance). He maintained that eliminating the income tax would benefit only the wealthy. Could you help me show that eliminating the income tax is in everyone’s best interest?

TaxesAnswer:

Ultimately, the poor are hurt most by income taxes and government spending of any kind.

When government spends, it must tax or run a deficit. Both harm the poor. Deficit spending results in inflation. People on a fixed income, low income, or no income at all are hurt most by inflation. The little money that they have buys even less than before.

When government taxes middle or upper income individuals, money is diverted from consumer spending, spending which otherwise would create jobs that might lift some of the poor out of poverty.

Instead, the tax dollars go to government spending, which delivers half the service at twice the price of the private sector. Gross domestic product (GDP), a measure of wealth creation, goes down as government spending goes up (for details, see Chapter 12 of my book, “Healing Our World,” available as a free download [1992 edition] at www.ruwart.com or [greatly expanded and footnoted 2003 edition] for purchase from The Advocates).

Less wealth creation means that goods and services are more expensive than they otherwise would be. The poor are hurt the most when prices rise or do not fall as they otherwise would.

Thus, when government spends, GDP falls and inflation grows, middle and high income individuals cut back on discretionary spending, like vacations; the poor, however, must cut back on necessities, such as food, safe housing, and preventative medicine.

On the other hand, when government spending slows, inflation slows too and jobs increase. Some of the poor move into the workforce and become more affluent.

Income taxes are bad for everyone, but the poor are hurt the most. The hidden negatives are often overlooked, and those who are trying to help the poor often hurt them out of ignorance.

Does Australia Disprove Arguments Against the Minimum Wage?

in Ask Dr. Ruwart, Liberator Online by Mary Ruwart Comments are off

Dr. Mary Ruwart is a leading expert in libertarian communication. In this column she offers short answers to real questions about libertarianism. To submit questions to Dr. Ruwart, see end of column.

Does Australia disprove arguments against the minimum wage?

QUESTION: A recent graphic going around Facebook asserts that Australia’s employment situation disproves the notion that a high minimum wage leads to higher unemployment. The graphic says the Australian minimum wage is the equivalent of $16.43 and their unemployment rate is Does Australia disprove arguments against the minimum wage?5.3%. Does this refute arguments about the minimum wage?

MY SHORT ANSWER: The real question is “Without the minimum wage, would employment be higher than it is now?” Almost all of the research suggests that the answer would be a resounding “yes.”

However, another aspect of raising the minimum wage is the destruction of jobs of our most disadvantaged workers (minorities, undereducated, etc.). As minimum wage rises, flipping hamburgers (for example) becomes more attractive to college students, teens saving for college, etc. Minorities without a high school diploma become less necessary to employers; as a result, the disadvantaged often end up with no job at all because they have few other options. Their primary bargaining chip is their willingness to take a little less pay than their advantaged counterparts.

To the extent that minimum wage laws take this option away, they destroy jobs for those who can least afford to be without one.

In his book The State Against Blacks, economist Walter Williams points out that expansion of the minimum wage laws was the primary cause for black teenage unemployment, which skyrocketed after 1950.

The disadvantaged in Australia have probably been displaced from the job market in favor of the advantaged because of their high minimum wage.

LEARN MORE: Suggestions by Liberator Online editor James W. Harris for further readings on this issue:

* “The Australian Minimum Wage Myth” by John Stossel, July 13, 2012. The award-winning libertarian journalist shows the devastating effect of the minimum wage on young, unskilled workers.

Excerpt: “In June, Australia’s unemployment rate for workers age 15 to 19 was 16.5%. Last December, 63% of all jobs lost were jobs for young, unskilled Australians.

“It’s simple: when the price of something goes up, people buy less. So when the price of labor goes up, employers hire less. …. The unseen consequences of minimum wage laws are the millions of poor, disadvantaged people who don’t have job opportunities. In the United States, it hurts poor people and inner-city minorities. In Australia, it hurts young workers.”

* “April unemployment down, as Australians stop looking for work, and full-time jobs give way to part-time work” is a short report by Roy Morgan Research, which describes itself as “Australia’s best known and longest established market research company.”

Excerpt: “In April 2013 an estimated 1.15 million Australians (9.3% of the workforce) were unemployed. This is down 1.5% from last month and is the lowest level of unemployment in Australia for nearly a year, since May 2012 (8.2%, 997,000).”

Minimum Wage, Maximum Damage by Jim Cox. This short (40 pages) idea-packed booklet annihilates the arguments for the minimum wage. It explains in clear, concise and compelling language how and why the minimum wage destroys jobs and causes great harm and suffering. It’s a great resource to quickly learn the best arguments against this misguided and misunderstood law. Published by the Advocates for Self-Government.

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